Thursday, April 19, 2012

Rights and Free Market System

There is the idea that human beings have certain "natural rights" and a free market can preserve those rights. The right to freedom and the right to private property are the two rights that free market system protects.

John Locke - Natural Rights of Human Being

John Locke (1632 - 1704) is credited with developing the ideas of natural rights of human beings tio liberty and private property. According to him, if there is no government, human beings would be in a state of nature, a state of perfect freedom. In this state, there is law of nature, that is, the moral principles that God gave to humanity and those principles are discovered by the use of God-given reason by everybody. He pointed out that the state of nature has a law of nature to govern it, which obliges everyone. When any body uses his reason, he conclude that no one out to harm another in his life, health, liberty, or possessions. The law of nature informs us that each man has rights of ownership over his own body, his own labor, and the products of his labor on material provided by nature.

However, the state of nature is a perilous state, in which individuals are in constant danger of being harmed by others and the enjoyment of the property that a person has is very unsafe in the natural state.hence, inviduals organize themselves into a political body and create a government whose primary purpose is to protect the natural rights of its members. As the political body is formed for the purpose of protecting right to liberty and property, the government canot interfere with any citizen's natural rights liberty and property except as needed to protect their liberty and property from being invaded by others. (A tax on property may be justified and compulsory military activity participation may be justified under this reason).

Locke did not use his theory of natural rights to propose or support free market system. But authors like Friedrich A. Hayek, Murrya Rothbard, Gottfried Dietze, Eric Mack have employed the theory to support Free Market system.

Criticism of Locke's Ideas

1.All rational human beings are supposed to be able to intuit or conclude intuitively that rights to liberty and to property exist. Many do not conclude that way.

2. Negative rights and positive rights: Critics have argued that the right to liberty and right to property are not overriding rights to other rights. Hence, one cannot support the argument that free markets have to exist to protect right to liberty and property.

3. Free markets create high economic disparities.

4. Individuals do not acquire abilities to be capable individuals on their own. It is caring relationships that make individual persons capable human beings and there caring responsibility falls on them. Property a produces through his labor depends ultimately on the skills he acquired from those who cared for him, and on the cooperative work of others in the community. Persons are morally required to sustain these relationships and care for others as others have cared for them.

Adam Smith - Utility Argument

Smith's idea is that when private individuals are left free to seek their own intersts in free markets, thye will inevitably be led to further the public welfare by an invisible hand.

"By pursuing his own interest he frequently promotes that of society more effectively than when he really intends to promote it."

Private businesses are led to serve society motivated by self-interest.

"It is not from the benevoelence of the butcher, the baker, and the brewer that we expect our dinner, but from their regard for their own self-interest. We address ourselves not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages."

Criticism Against Adam Smith's Arguments

1. Emergence of monopolies in various industries does not promote efficiency that was envisaged by Adam Smith in a competitive economies.

2. Producers are polluting environment as they pay no price for it.

3. The market system os a society is making humans selfish and this widespread selfishness is being interpreted as natural. A major moral defect of a society built around competitive markets, in fact, is that within such societies the natural benevolent tendency toward virtue is gradually replaced by self-interested tendencies toward vice. Free market societies are morally defective because they encourage morally bad character.

4. The socialist economist Oscar Lange demonstrated that a "central planning board" could effectively allocate goods in an economy without having to know everything about consumers and producers and without engaging in impossibly elaborate calculations. This point to answer some economists and thinkers who support free markets arguing that a central board cannot make efficient planning.